ByOdysseas Papadimitriou, ContributorFebruary 9, 2012

Personal finance expert Suze Orman poses at the OWN: Oprah Winfrey Network launch cocktail reception for the Television Critics Association Winter press tour in Pasadena, Calif., last year. In January, she released her own prepaid card, which tries to fix a nonexistent problem.

Many pointed out the potential conflict of interest: Ms. Orman is offering a self-branded financial product while also positioning herself as a consumer advocate on national television. (Orman has vowed not to discuss prepaid cards on air and says that financial gain was not behind her decision to offer the card.) Others have noted that while the Approved Card has some good features, it’s being marketed in a misleading fashion by creating the false expectation that it will affect consumers’ credit scores.

Here’s Orman’s pitch: “Currently, if you spend money on a debit card or just in cash, it does not report to a credit bureau. Therefore, it does not give you a FICO score,” she told Arianna Huffington in an interview shortly following her card’s launch. “I wanted to change that. I wanted to create it where the people who paid in debit cards and in cash were rewarded and people who were paying the minimum payment due on credit cards really had algorithms that applied to them.”

She also noted that credit card users who only make minimum monthly payments and rack up credit card debt should not be unduly penalized, but not be overly rewarded either. This, Orman said, would “keep them out of trouble.”

Orman’s desire to change the system stems from her belief that it is fundamentally flawed, in the sense that it unfairly prevents those who prefer not to use a credit card from building the credit necessary to garner lower insurance premiums, take out a loan, get a job, etc.

So, is Orman right? Is our credit reporting system in need of an overhaul? Will a company get a better gauge of customers’ creditworthiness if their cash and debit card payments are included on credit reports?

Hardly. How you spend your own money doesn't say much about your creditworthiness, which gauges how you handle other people's money (from a credit card company or bank, for example).. Not only is there nothing to gauge if you don’t have any credit at your disposal, but being unwilling to even have credit suggests an implicit admission that you cannot handle the responsibility – quite worrisome from a lender’s perspective.

This is especially true since you don’t actually need to make purchases witha credit card to build credit. One alternative that we all have at our disposal is simply having an open credit card that is in good standing. Even if it’s locked in a drawer, you’ll still see positive information flowing into your credit reports on a monthly basis simply because you are not abusing the credit at your disposal.

While there is clearly no fundamental credit scoring issue at hand, let’s assume for a moment that there is. How would Orman’s prepaid card address it?

“This is the first prepaid card in history, in history everybody, that will be sharing aggregate anonymous information with TransUnion, one of the three credit bureaus,” Orman told Ms. Huffington in the interview. “Now, I am hoping that Equifax and Experian join this experiment. It will take 18 to 24 months of TransUnion looking at this data to decide can it predict future behavior.”

That's a problem. Orman's card will not help anybody build their credit score for at least the next 18 months – and perhaps for much longer, unless TransUnion finds a reason to include debit payments in their credit-score calculations. Yet Orman markets this TransUnion reporting project as one of the nine primary reasons to use The Approved Card.

In her defense, Orman says near the bottom of her website's explanation of the TransUnion reporting project that "The Approved Card is not designed to improve your credit record, history, or rating. Use of The Approved Card will not and cannot improve or fix your credit score or rating."

Still, if the entire buzz around this debit card is centered on a supposed benefit that will not occur before 18 months (and may not occur at all), it seems a little disingenuous to collect fees and make money from customers without being upfront with them: They're guinea pigs for a dubious experiment. There is no prepaid card that will help you build or rebuild your credit history. Secured credit cards are best suited for this task.